 Abu Dhabi Investment Authority tower |
Abu Dhabi Investment Authority will become the largest shareholder in Citigroup, with a $7.5 billion capital infusion in return for 4.9 percent ownership of the bank, America’s largest by assets.
The Abu Dhabi Investment Authority, or ADIA, is an investment arm of the Abu Dhabi government, with an estimated $1 trillion under management. Abu Dhabi is the largest emirate in the United Arab Emirates and its capital.
According to the Wall Street Journal, the investment will make ADIA the largest shareholder of Citigroup, exceeding the stake held by Saudi Prince Alwaleed bin Talal.
Citigroup is facing a capital crisis over declared loses in collateralized debt obligations, including mortgage-backed securities estimated in the billions of dollars.
Earlier this month, Citigroup Chief Executive Officer and Chairman Charles Prince resigned after announcing the bank was facing as much as $11 billion losses in addition to billions of dollars already written off.
Citigroup has not yet selected a new CEO.
Wall Street analysts today were uncertain if the Abu Dhabi capital infusion would rescue Citigroup from the current credit crisis, noting that a $2 billion capital infusion the Bank of America pumped into mortgage banker Countrywide has not prevented its capital position from further erosion.
Separately today, the Wall Street Journal reported Dubai International Capital, controlled by Sheik Mohammed bin Rashid al-Maktoum, Dubai’s ruler, made a “substantial” capital investment in Sony in return for an ownership position believed to be slightly less than 5 percent.
With the price of oil edging toward $100 a barrel, Middle Eastern oil-producing states have experienced a windfall in revenue.
By comparison, in 2003 oil was trading at $44 a barrel, and when President Bush was inaugurated Jan. 20, 2001, oil was trading at $24 a barrel.
WND has reported the U.S. now imports 12 million of the 20 million barrels of oil it consumes daily, at a cost of about $1 billion.
Investment funds held by governments, known as “sovereign funds,” are estimated to be in the trillions in Middle Eastern oil-producing states.
WND reported Dubai has moved to purchase approximately 20 percent of NASDAQ, one of the two largest stock exchanges in the U.S.
CNBC reports today that Arab investors have put some $70 billion in U.S. equities this year.
WND has also reported the crisis in mortgage-backed securities and derivatives is beginning to threaten the solvency of hundreds of financial institutions, including some of the largest, that hold the bundled instruments in their asset portfolios.
This morning, Citigroup was trading above 30 on the New York Stock Exchange, still down considerably from the stock’s 52-week high of 57.
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